I am 42 years old. I have a son (5 years) and a new born girl (5 months). My take home salary is ₹80,000. I own a house and I have closed my home loan. Presently, the house I own costs ₹75 lakh. I don't have any bank balance as of now because I have diverted all my money for loan. I have a health insurance cover of ₹5 lakh each for three members (the new born is yet to be included). Kindly let me know how to start investing, so that the education and marriage of my kids and my retirement is taken care of.
- Satish Kumar S
You might be saving some money every month now since you don't have to pay an EMI for your home loan anymore. You can use the money to start your financial planning programme.
Emergency Fund: Since you don't have any money in your bank account, your first priority should be to create a fund that would help you tide over a financial emergency. With two kids at home, you should create a contingency fund that will take care of living expenses of six months. Start with setting aside a fixed amount every month. Do not touch it unless there is an emergency. This way you will be able to create an emergency fund in a few months.
Health Insurance: You have covered yourself and two other family members for a sufficient sum. You should think of securing a cover for your new born, too.
Life Insurance: You must buy an adequate life insurance cover since you have three financial dependents. Buy a large cover that will take care of your dependents financial needs if something happens to you. You may go for online term plans from ICICI Prudential or HDFC Standard life insurance. Do not buy insurance policies with savings or investment element in them. They are expensive and they do not offer your adequate cover or great returns.
Investment: Start investing through a monthly Systematic Investment Plan (SIP) in one or two equity mutual funds to take care of your kid's education and your own retirement. Once you are near your financial goal, you should take money out of your equity investment and transfer the money to a safer avenue like bank deposit or liquid mutual fund scheme. This is to ensure that a sudden volatility in the stock market do not upset your financial goals.
Click here for a list of best diversified equity funds.
We have made following assumptions to reach the monthly investment figures in the table:
- present expenses
- inflation @ 8% p.a to calculate future value of goals
- time remaining to reach goal
- mutual fund returns of 12% p.a.
- Current household expense of ₹30,000 per month. Post retirement expenses inflated at 8% p.a. Life expectancy taken as 80 years.
https://docs.google.com/spreadsheets/d/13wN6KL2vNu1mpqz2dtjyIlTCQa-2IDJH3pwO6oT418g/edit?usp=sharing
This article was originally published on November 20, 2015.
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